Disability Insurance

Why Do You Need Disability Insurance?

 

Your ability to earn an income is your most valuable asset and the foundation of any financial strategy. We know you work hard to support your lifestyle. Your income pays your expenses off daily living and enables you to build wealth for the future you desire.
But what if illness or injury made it impossible for you to work?

  • How long would your savings last?
  • Would your spouse’s or partner’s income be sufficient to make up the shortfall?
  • What lifestyle changes would you or your family need to make?
  • What about your dreams for the future— College for your children, travel, a comfortable retirement?
  • What would happen to your credit rating?

 

Are There Alternatives?

 

It’s really important to think through each possible “Plan B”. However, are any of these really viable alternatives?

Personal Assets: Most financial advisors recommend counting on cash reserves only for the first few months. A long-term disability can rapidly erode assets.

Social Security: Given the stringent requirements to qualify for benefits, fewer than 30% of claims are approved at the initial level. After all appeals, only about half of claims are ultimately approved. (Source: Social Security Administration, 2006)

Workers Compensation Benefits generally cover employees for job-related accidents and illness, not those suffered outside of the workplace.

State Temporary Disability: NY, NJ, CA, HI, and RI provide a minimal level of short-term coverage for employees. Other states offer no such coverage.

Group LTD: Employer and association long-term disability plans are highly variable, but rarely offer benefits like a guaranteed premium or cost of living adjustment. Benefits under employer plans are generally offset by Social Security and other government programs. Review your coverage carefully.

 

What Causes Most Disabilities?

 

Accidents aren’t the only cause of disability. In fact, the majority of all claims are due to illness.
Disablity-pieChart

 

Musculoskeletal/connective tissue ………………………………………27.5%
Cancer ……………………………………………………………………..14.6%
Cardiovascular ……………………………………………………………..9.1 %
Maternity-related ……………………………………………………………5.1%
Injuries/accidents ………………………………………………………….10.3%
Mental/psychiatric disorder………………………………………………..9.1 %
Neurological …………………………………………………………………6.9%
Source: 2011 Long-Term Disability Claims Review, Council for Disability Awareness. For more information go to www.disabilitycanhappen.org.

 

Policy Benefit Examples

 

*Non-Cancellable and Guaranteed Renewable An insurance company cannot cancel your policy, increase your premiums or change policy provisions if you keep paying premiums due, until a certain age (normally age 65). After that, you can renew your policy at rates then in effect as long as you continue to be gainfully employed full time.

Total Disability You will be considered totally disabled if, solely due to injury or sickness, you are not able to perform the material and substantial duties of your occupation, even if you are gainfully employed in another occupation.

Your occupation means the occupation(s) in which you are gainfully employed during the 12 months prior to the time you became disabled.

If you have limited your occupation to the performance of the material and substantial duties of a single medical or dental specialty, that will be deemed your occupation.

Waiver of Premium Any premiums that are due while you are disabled and receiving benefits will be waived, and for 6 months after you recover. Also, any portion of premium you have paid that applies to the period after you first became disabled will be refunded.

Occupational Rehabilitation, Modification and Access Benefits The insured may be eligible for an occupational rehabilitation benefit that is part of a mutually agreed-upon formal plan. Additionally, the insured may be eligible for a reimbursement benefit for the cost of workplace modifications that will help the insured return to gainful employment.

Elimination Period The elimination period is the number of days that must elapse before benefits become payable. You may be disabled from the same or a different cause for this entire period. Days of disability need not be consecutive, but must occur within an accumulation period of 210 days.

Waiver of Elimination Period The elimination period can be waived if you become totally disabled within five years after the end of a previous disability that lasted more than 6 months and for which you have received benefits.

Benefit Period This is the longest period of time for which an insurance company will pay benefits for a continuous disability from the same cause.

Recurrent Disability If, after a disability for which you have been paid benefits, you return to full-time gainful employment but become disabled again within 12 months, the later period of disability will be considered a continuation of the previous one. The later period of disability must result from the same cause or causes as the previous disability. Benefits will resume with no new elimination period required.

Presumptive Disability An insurance company will consider you totally disabled—even if you are gainfully employed—if you suffer total and complete loss of sight in both eyes; hearing in both ears; speech; or the use of both hands, both feet, or one hand and one foot, in their entirety. Your loss does not have to be irrecoverable.

Capital Sum Benefit An additional lump sum benefit is payable for specified losses: total loss of sight in one eye, or loss of a hand or foot. This benefit equals 12 times your monthly indemnity.

 

for more info check out the Guardian® brochure “Short Course in Individual Disability Insurance”

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